What's next in energy: Vinod Khosla

NEW YORK (Fortune) -- You got on the ethanol bandwagon early. What's on tap for 2007?

This will be the year of cellulosic ethanol - fuel made from grasses, wood chips, and other underutilized biomass. New fuels like butanol will also come along. I wouldn't be surprised to see biogasoline either. We'll see biofuels move from their role as an additive to gasoline to a primary fuel for automobiles.

Vinod Khosla

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What still stands in ethanol's way?

You'll see critics, often funded by the petroleum interests, increase their attacks on biofuels through surreptitious PR campaigns, while publicly supporting these renewable fuels. We might even see oil prices manipulated down to thwart this transition, which is essential for our planet.

What other areas of alternative energy should we be watching?

Coal. We will continue to see a push for "clean coal," as it's a way for a few of the traditional power-generation firms to delay action. Clean coal will be in a horse race with wind and solar. I'd personally handicap solar thermal, not photovoltaic solar or clean coal to win.

How will Congress and the presidential candidates affect the equation?

The biggest leverage will come from the similar positions of the presidential candidates for 2008. Most of the rumored candidates already support an aggressive biofuels policy, as do the Democratic majorities in Congress and the Bush administration.

Where are you investing, outside of green tech?

We're excited about mobile applications and see breakthroughs in semiconductors and batteries.

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